SPEECHES — DG ROBERTO AZEVÊDO
Speech by the Director-General
Prime Minister Sagintayev,
Ladies and gentlemen,
I want to thank Kazakhstan and the Friends of Investment for Development for inviting me to join you today, and for hosting this event.
Let me also extend my thanks to the government of Kazakhstan once again for stepping forward to host the next WTO Ministerial Conference in 2020. Coming from one of the newest WTO Members, I think this shows tremendous commitment to the multilateral trading system. It also shows your belief in the capacity of trade to deliver for growth, job creation and development.
Kazakhstan and other Eurasian economies have made significant progress over the past two decades, thanks in part to your embracing of open trade and investment policies.
Growth has been robust, inflation has fallen, and impressive gains have been made in reducing poverty.
A strong multilateral trading system helps to underpin all of this. And so your support for the system is hugely important – particularly in the current circumstances.
We are meeting at a crucial moment for global trade.
Tensions are escalating rapidly. New tariffs announced so far this year cover hundreds of billions of dollars of trade. Further measures have been proposed. And at present there is no end in sight.
If this trend continues, we could see a real threat to stability and therefore to jobs and growth. And with the integrated nature of trade today, this would affect everyone, in all regions of the globe.
We may already be seeing some early effects. Export orders are declining. Indicators show that businesses are holding off on making job-creating investments.
This is very concerning. In fact, this trend runs contrary to what this forum today aims to encourage, which is to facilitate investments to support further growth.
Just yesterday we announced a revision to our trade forecasts – from 4.4% growth for this year, down to 3.9. This is still healthy, but it is an indication of what a further escalation of tit-for-tat trade restrictions could mean.
Our economists have been assessing a variety of possible scenarios. This includes a scenario of full, global trade war, with international trade cooperation breaking down and all countries setting tariffs non-cooperatively. This scenario would knock around 17% off global trade growth, and 1.9% off GDP growth.
Clearly we cannot let that happen.
There is a responsibility on the whole international community to help ease tensions. I have been consulting with leaders around the world to this end.
It is important to note that at the root of the current tensions is the argument that the trading system is allowing distortive trade practices to go unchecked – and therefore that the system needs to change, so as to be more responsive to such measures.
But I don’t think that anyone believes this can be done through a technical discussion. This crisis is political. It requires a political solution.
This is why a high-level, political conversation about 'WTO reform' or 'modernisation' is beginning to emerge. It is seen as a way to deal with some of the big trade problems that some members have identified.
And it has been gathering significant momentum.
A variety of initiatives and meetings are being prepared. The issue was at the top of the agenda when I met with trade ministers at the G20 meeting in Argentina two weeks ago. They committed to work on ways of improving the WTO to ensure that it can meet current and future challenges.
This is very positive – and it is useful for the wider debate among all WTO members in Geneva.
We all have to consider how the trading system can be better. We have to think about how it can be more responsive to members’ needs and to the challenges of a changing global economy.
In a sense, today's initiative is an important addition to those efforts.
It will help us to better understand the evolving linkages between trade, investment and development in Eurasia, and around the world.
For much of the 20th century, goods were made in one place and shipped to another. In that scenario, manufacturing FDI was mostly a substitute for trade. Companies either exported or were established in the target market through FDI and would produce, assemble and distribute their products from there.
Today, trade is far more multi-faceted, involving flows of goods, services, people, and also investments. Today nearly two-thirds of traded goods were made with components from at least two different countries.
This new reality presents many opportunities to leverage trade and investment for growth and development. However, for these elements to play their full part, the right conditions need to be in place.
A key element here is trade facilitation. We need to ensure smooth customs procedures, especially when goods and components cross borders many times during their production.
The WTO's Trade Facilitation Agreement promises to deliver precisely this.
This agreement has huge economic significance, potentially cutting trade costs globally by an average of 14.3 percent. This is a bigger impact than the elimination of all remaining tariffs in the world today.
Implementation of the TFA can also be a powerful instrument in this region, which is at the centre of the modern “Silk Road” – a route that has contributed to the exchange between Europe and Asia since ancient times.
To make this a reality and ensure that trade can flow smoothly, you need the appropriate infrastructure. You need roads, railways and telecommunications. And you need human capital.
This requires investment. And it also requires strong, reliable institutions.
These elements will be critical to further boost the competitiveness of Eurasian economies.
Progress here could help overcome supply side constraints and promote the diversification of production. It can improve access to more advanced technologies, production techniques, and managerial methods. It can also boost connectivity, tackling the inherently challenging conditions in the region, such as low population density and vast distances.
Many governments simply do not have the resources to invest in all this. Therefore, a large part of the necessary investment will need to come from other partners. Facilitating investment flows, therefore, can have a huge impact.
But of course, this is easier said than done.
Projections for 2018 are highly uncertain. Robust economic growth and trade growth, combined with rising commodity prices suggest a potential increase in global FDI.
However, as I have said, there are risks to such forecasts, and uncertainty is like kryptonite to investors.
Nonetheless, some important steps have been taken. Kazakhstan, for example, has made significant progress over the last year in this area with its framework for FDI facilitation. I understand that this could become a model for the region.
So what more can members do?
Cooperation at the global level can also play an important role.
Some WTO members have been holding structured discussions to consider whether – and how – the WTO might better contribute to facilitating investment flows. This initiative was launched at our 11th Ministerial Conference in Buenos Aires last December, with 70 members signing up to launch a joint initiative on the topic.
The Friends of Investment Facilitation for Development, including Kazakhstan, were a driving force behind this initiative.
The work of the group has been important to highlight the interlinkages between trade, investment and development. I think that this has helped to shift from the more controversial debate about investment protection towards a more positive focus on facilitation.
This discussion also resonates with the challenges faced by the users of the trading system. The fact is, we live in a world where traditional barriers to foreign investment are falling. Investment facilitation is actually what investors, entrepreneurs and businesses tell us they most urgently need to make FDI in many markets a reality.
While some members do not support this work, it is clear that it is fast evolving. Proponents have engaged in an open and transparent manner. Interest and engagement are high, with many non-signatories also participating in the discussions.
As to where all of this leads, that is for the proponents to determine, working with the rest of the membership.
Ultimately facilitating investment is in everyone's interest.
It is critical to expanding development, fuelling innovation, generating jobs, and achieving the Sustainable Development Goals. So it's important to get it right. And that includes an informed, open and frank debate such as the one we're having here today.
It can be difficult to focus on detailed issues of policy when it seems that any opportunity to make progress could be jeopardized by escalating tensions. But if you ask my advice, I would say: don't be knocked off course.
We have to respond urgently to the very difficult, systemic issues that we face in the trading system. But we have to do it at the same time as finding positive routes forward in our deliberations in all areas. Members can't put this issue on hold – just as we can’t put on hold issues like agriculture, food security or fisheries subsidies. They are too important for that.
We have to make progress across the board. This will be crucial to strengthening the multilateral trading system for the long term – something which I continue to believe is absolutely vital for us all.
Since it was created, the trading system has promoted growth and development by providing stability and predictability in economic relations around the world. This task is no less crucial today. So we have to keep updating and strengthening the rules and structures that are in place today. These are the pillars of the global economy.
So let's be clear and let's be loud about the value that the trading system provides.
I am calling on everyone who believes in trade as a force for good to speak up. And I hope that this region will play its full part.
The region's engagement in the WTO, as well as Kazakhstan's bid to host MC12, show your faith in trade to help improve the livelihoods of your people. We must do all we can to honour that faith.
I wish you a productive event.
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